California legislators on Tuesday accustomed a battleground bill that would accede contractors for companies like Uber and Lyft as “employees.”

The state Senate voted in favor of the bill — dubbed Assembly Bill 5 (AB5) — that would ensure gig abridgement workers in companies like Uber, Lyft, and DoorDash are advantaged to minimum wage, workers‘ compensation, and other benefits.

The advancing bill was passed in a 29 to 11 vote last evening, landing a severe blow to Uber and Lyft, which have long adjoin the legislation citing apropos that it would abnormally impact their businesses.

AB5 had passed the State Assembly on May 29 with a 53-11 vote. It has now been sent back to the Assembly, where it’s accepted to be ratified by California Governor Gavin Newsom. If signed into law, AB5 will go into effect starting January 1, 2020.

The development about upends the whole architect business model, as it makes it difficult for companies to allocate their drivers as absolute contractors. However, it doesn’t turn contractors into actual full-time employees.

The rise of the gig economy

Gig abridgement is all about hiring absolute contractors and freelancers instead of full-time advisers for jobs — deemed adjustable and acting — in sectors that often absorb abutting with barter through an online platform.

But the fluid nature of these transactions have also led to an abrasion of job aegis and allowances that are about associated with full-time positions.

In casual AB5, the bill grants gig workers allowances such as disability, workers compensation, retirement, health care, death benefits, and paid time off. But opponents also feel the move could hurt those who want to work adjustable hours.

“We would likely have to exert more ascendancy over drivers, cogent them where to work, how to work, and who they can work for,” Uber warned last month.

“Uber would likely hire far fewer drivers than we currently support, and we’d likely have to crave a minimum number of hours per week. Scheduling and rigid shifts would become the norm, and Uber would likely anticipate drivers from alive for other rideshare companies,” the aggregation said.

Uber, Lyft, and Doordash — which have built multi-billion dollar businesses on absolute contractors — have tried and failed to derail attempts to reclassify their workers several times before, in part because it would access operation costs at their end.

The companies pumped in $90 actor last month to back a ballot action that would assure them from having to allocate their absolute contractors as employees. They even appropriate a minimum wage of $21 per hour in hopes of negotiating a compromise.

In addition attack to build accord adjoin the bill, they were found to have paid drivers $100 to beef adjoin the legislation.

But Lorena Gonzalez, California’s 80th District Assemblywoman who sponsored the bill, acicular out the companies’ affectation in spending too much money angry adjoin workers‘ rights that, instead, could be used to pay them.

Spiraling costs and cratering stock prices

It’s worth noting that the business models of these companies are already under severe strain. Although the extent to which AB5 could impact these platforms is unknown, it’s accepted to drive their labor costs up by 30 percent, according to a report by San Francisco Chronicle.

Uber, for its part, has already been bogged down by costs accompanying to its IPO beforehand this year. Last month, the aggregation appear a record second division loss of $5.2 billion, its better ever annual loss, stemming from $3.9 billion worth stock-based advantage costs it incurred as a result of going public.


The aggregation laid off 435 advisers across its engineering and artefact teams yesterday, on top of the 400 business team employees who were handed pink slips in late July in an attack to cut costs.

Having said that, it won’t be a abruptness if Uber — and others — pass on the extra costs to consumers in order to offset some of the money-losing affairs of AB5.